I’m a big resolution-setter. Or more accurately a goal-setter. Every year I develop a list of goals I commit to over the next 12 months. Some are simple, daily habits and some are more complicated and will take the entire year. I do track my progress every day (in a spreadsheet). I’m a big believer that small improvements over time add up, so I break down the big tasks into daily activities that add up to big gains.
I know that money resolutions are at the top of many people’s lists. And I have money-related goals myself. In fact, I have upcoming posts on how my 2016 money resolutions went as well as what I want to accomplish in 2017.
I also know that it doesn’t take long for resolutions to be forgotten. I see this every year as my gym somehow doubles in participation towards the beginning of January. By the end of the month half of the new people are gone. By the middle of February it’s back to normal.
Part of keeping resolutions alive through the year is that they need to be both meaningful as well as relatively easy to implement/achieve. As such, I’d like to share three simple money resolutions for your consideration. If you implement them, your finances will benefit in 2017 and beyond.
Earn, Save, and Invest
You know by now that this blog is built on three principles: earning, saving, and investing.
So it seems right to give you one suggested resolution in each category. This way you’ll have them all covered.
In addition, if you don’t like one sort of suggestion, there will be different options to inspire you.
Earn: Grow Your Career
It’s probably no surprise to you that I would recommend focusing on your career. After all, we’ve talked about how doing so is worth millions of dollars. So how could I ignore it?
But you may be thinking that I want you to commit 20 hours a week to doing so. Nope. I said these were going to be SIMPLE resolutions, right? I do not want to over-burden you with tasks.
Instead, I am suggesting you take two small steps to grow your most valuable asset:
- Look over my post titled How to Manage Your Career to Make Millions More. Review the seven steps to growing your career.
- Pick one of the seven to focus on this year. Write down which one it is and a few, specific steps you’ll take to improve in that area.
That’s it. Simple, right?
I’ll also give you some inside information. While all seven steps help grow your career, the first two are the most important. So if you haven’t got either one of those mastered you’re likely to get the biggest bang for your buck by focusing on one of them.
Save: Grow Your Gap
When we talked about achieving financial independence we discussed the gap between what you earn and what you spend. Some people call this your savings rate. Whatever you call it, the tip is to review your spending and work to grow your gap. I’d suggest 5% additional savings as a goal to shoot for.
How do you go about doing this? Simple:
- You’ll need to put together a cash flow plan based on last year’s spending.
- Now look where you can save $100 here, $500 there, and so forth. You don’t have to go wild with the spending cuts — after all you want to enjoy life. So don’t think about starting to make your own toothpaste to save a dollar here and there. Instead pick and choose where you can live with cuts — something I call moderate and selective frugality.
The reason this suggestion is so powerful is that it can cut YEARS off your path to early retirement/financial independence. If you don’t believe me, play with this calculator a bit. Just look at the difference in years to retire between saving 15% of income and 20%. This alone saves you 5 YEARS of working.
Invest: Grow Your Returns
I’m hoping that you’ve already implemented my suggestion to invest as much as you can for as long as you can. Therefore I’m suggesting in 2017 you focus on your return rate. And one great way to do that is to limit your expenses. After all, a dollar saved by lower investing expenses is a dollar extra in return.
Here are a couple examples that may help you as you look to reduce investing expenses:
- You know I love index funds. But all index funds do not have the same costs — even for the same type of fund. One company may charge 0.5% and another may charge 0.2% for the same thing. It doesn’t seem like the difference is much, but it all adds up, especially over a 40-year investing horizon.
- For those of you who invest in real estate, be sure you watch your expenses as much as you watch your rents. I have rents maxed out so there’s not much I can do there. But I can work with my property manager (and I am) to keep costs as low as they can be and still offer a great living experience to my tenants. You can do the same.
Grow Your Net Worth
So that’s it — three simple, relatively easy steps that can make a dramatic difference in your net worth over the course of a year.
I hope you adopt some of these or create a set of your own to make 2017 a stand-out year for your finances.
Let me know if you have specific money goals for 2017 and what you’re planning on doing to achieve them.